Morteza Khorsandi; Nastaran Alibabaie
Abstract
Since the unemployment and inflation are two target variables of economic policies and in many cases policy-makers have to sacrifice one for another, the question arises that what is the preferences of society between these two targets. The appropriate answer can be obtained when the effect of each variable ...
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Since the unemployment and inflation are two target variables of economic policies and in many cases policy-makers have to sacrifice one for another, the question arises that what is the preferences of society between these two targets. The appropriate answer can be obtained when the effect of each variable on welfare is estimated and compared with each other. Therefore, in this paper, the effect of unemployment and inflation on happiness as an index of welfare is estimated. This estimation is done with two panel data samples. The first sample consist of 146 countries that happiness index is calculated for them and the second sample only includes Iran and its neighbors. The results show that in both cases unemployment has more effect on reducing happiness. In the sample of Iran and its neighboring countries, the absolute value of unemployment coefficient is 2.4 times higher than that of inflation. Accordingly, it can be concluded that in construction of social loss functions and also misery indices the weight of unemployment must be greater than inflation and the proposed relative weight for Iran is 2.4.
Hossein samsami; Parviz davoodi; Jalal jahani goravan
Volume 14, Issue 55 , January 2015, , Pages 71-103
Abstract
The performance of the fractional-reserve banking system, will lead to a vast money creation in favor of banks. This results in inflationary problems. This type of banking system will also lead to some issues like the transfer of borrowers’ risks to banks and sometimes to depositors, monetary and ...
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The performance of the fractional-reserve banking system, will lead to a vast money creation in favor of banks. This results in inflationary problems. This type of banking system will also lead to some issues like the transfer of borrowers’ risks to banks and sometimes to depositors, monetary and banking crises, free ridings, adverse selection and moral hazard, and etc. In this research, the cost of money creation is determined by two scenarios. The first scenario is money creation in a fractional-reserve banking system, and the other is central bank’s money creation with requirement reserve of 100 %. Then the social loss function related to money creation is defined. The results of minimizing social loss function with the constraints of Philips curve and aggregate demand function show that the instability and social loss will increase with reduction of the reserve requirement. In other words, policy makers can reduce social costs and instability of economy through the expansion in the reserve requirement.